If you read enough articles about personal finance you’ll surely begin to believe you are spending way too much money and not saving enough.

Most media outlets are focused on getting more and more readers, so they put up scary charts and graphics about how people are on the verge of bankruptcy, in order to scare them into reading and not being able to turn away.

You’ve probably heard some of the common points:

• Buying a cup of coffee each day will cost you tens-of-thousands of dollars over the course of your lifetime.
• If you would forgo a certain purchase, like a new car, you could invest that money and turn it into a much larger sum in the future.
• Skip brushing your teeth so you can save on the cost of toothpaste

Ok, the last one is just a joke.  Please keep brushing your teeth! 😉

They want you to feel that you need to save more, spend less, and feel bad about not doing enough.

Without a doubt, if you saved every penny and invested it, you’d be in a stronger financial situation.  But what kind of life is that?

These articles and commentators are missing the point.

In my opinion, the purpose of personal finance and financial planning is to improve the quality of your life, not turn you into a hermit who never does anything.

AN INABILITY TO SPEND

I have a friend who is really diligent about their money.  I would easily put them in the top 5% of people I know for how strong their finances are.

They have a good emergency fund saved up, they invest on a regular basis, and they understand the importance of a strong financial foundation.

The problem is that this person rarely does anything enjoyable.

They frequently turn down offers to grab dinner with friends, go to the movies, enjoy a relaxing vacation, or travel to far-off countries they’ve been dreaming of.

This person has put such an emphasis on the strength of their finances and planning for the future that they have sacrificed living their present life.

GETTING TRAPPED IN FRUGALITY

There is a term I once heard called the “Prison of Frugality.”  This person epitomizes that term.

People who see those negative articles and headlines over and over become programmed into a constant state of fear around their finances.

They swing so far to the side of frugality that it causes a psychological block on their ability to do the things they truly enjoy.  They simply cannot spend money on themselves out of fear or guilt.

One way out of this cycle is to deploy what is known as “conscious spending.”

CONSCIOUS SPENDING

Conscious spending is the act of being aware and deliberate about what you are spending your money on.

There are so many small buying decisions we make on a daily basis.  Without thinking about it, we whip out our credit cards and swipe away, and the seemingly irrelevant purchases we are making begin to add up.  Before we know it, we’ve spent an extra $20, $50, $100-plus dollars on things we had no intention of buying, or need.

People like my friend are terrified of this cycle, so they spend nothing.

But, instead of letting your spending (or lack thereof) control you, you can consciously set aside money for the things you want.  If you like taking an afternoon stroll to the coffee shop, and you budget that into your daily spending, there is nothing wrong with this.

The concept that if you never bought coffee and invested all of that money it would grow into a large sum is certainly true, but that can be said about any purchase!

SHEDDING THE GUILT

The key to breaking out of the “Prison Of Frugality” is to set a plan that covers your saving and investing goals, and gives you the freedom to spend the rest.

If you put money aside for all of the things you know you need to plan for, and still have money left over, you should feel confident in spending that remaining money.

The mindset you should have is knowing that having strong finances is important in order for you to enjoy your life and do the things you are passionate about.  It isn’t about hording all of your money for some future date at the expense of living today.

If you are doing all of the right things with your finances, feel good about spending on yourself.

As Ramit Sethi says, “You can spend extravagantly on the things you love, as long as you cut costs mercilessly on the things you don’t.”

Capably Yours,

Jared